Additional Praise for Financially Stupid People are Everywhere “In his plain speaking, no-nonsense style, Jason Kelly calls our national economic debacle as he sees it— no one is spared scrutiny By giving us simple financial rules to live by, Kelly’s message is clear: Financial swindlers are out there—always have been and always will be—but, they cannot succeed without financially stupid people (i.e., those who cannot “say no” to crippling debt) So, no finger-pointing, folks; just look at the “Man in the Mirror,” follow these rules, and make that change to financial freedom!” —Diane E Davies, Attorney and Professional Fiduciary “Jason Kelly brings light to many issues at grasp with Americans today, along with many solutions Maybe someday America will wake up and smell the coffee.” —Frank Mancini, CEO Bellabacci Inc “As a professional money manager I strongly believe being financially smart is better than being financially stupid Hence, reading Financially Stupid People are Everywhere is a must Most importantly, Jason Kelly once again hammers home the secret rule on how to get rich: spend less than you earn Also, be sure to NOT pay for this book with a credit card—use cash or a debit card.” —Charles F Michaels, President, Sierra Global Management, LLC “If the Tea Party Movement gets a hold of Jason Kelly’s new book, look out Washington come November!” —Peter Lawrence Alexander, The Business Parables (2010) “On the surface Financially Stupid People are Everywhere is a practical book with effective, clearly explained advices on how to keep control over your finances and stay out of the debt-trap But a more accurate reading reveals a deeper concept that could really improve your life: reducing voluptuous expenses is a prerequisite for achieving financial freedom, which in turn leads to stressless jobs, better work-life balance and—ultimately—a more meaningful and genuine way of living.” —Dario Di Bella, Executive, Financial Services, Accenture “I couldn’t stop reading It was infectious! Insulting, yet instructive Hold on So you’re saying we should take responsibility for our decisions? People seeking new ways to go into debt to live a fiction is at the root of most financial crises This book provides a nice kick in the pants to wake up and live responsibly I don’t agree with your characterization of the banks or the politics, but the personal lessons are useful.” —Brian Jacobsen, Ph.D., J.D., CFA, CFP(r) Associate Professor Economics, Wisconsin Lutheran College “Jason Kelly’s no-nonsense assessment of the global financial crisis shows that it wasn’t just financially stupid people working on Wall Street who caused the financial crisis, but also ones living on Main Street Daring to take the ‘other side of the trade’ and examine this aspect of the crisis during a period of increasing populism, Jason Kelly offers a Main Street explanation of the crisis along with easy, common-sense solutions that empower individuals to avoid becoming part of the next financial disaster.” —Richard Forno, Chairman, SNS Advisory Board Strategic Advisor to technology startups “Personal responsibility is the willingness to accept the consequences of one’s behavior without blame or excuse This quality is the bedrock of emotional stability and the lack of it is the financial cancer that almost destroyed the world financial markets in the first part of the twenty-first century Mr Kelly’s book is a mirror for seeing what financial irresponsibility looks like Whoever reads this book will see themselves as part of the problem instead of blaming everyone else Like a happy movie ending, this book carefully explains what the average citizen can to become financially responsible, worry free, and liberated from the bonds of the rich and powerful If every American would read this book and follow its advice, America could be solvent and its citizens would have financial peace of mind Get it now!” —Terry Sandbek, Ph.D., Psychologist; Author, The Worry Free Life “This book should be required reading in every high school economics class! Especially valuable is its clear explanation of how credit card debt works as compound interest in reverse How lucky a young person would be to realize this before they fall into the bankster traps.” —Ralph Allswede, Retired President, Precision Prototype & Mfg, Inc., and Consultant “This is a most insightful and easy-to-read synopsis of the causes of our economic problems in the United States! The discussions about solutions are thought provoking The writer has an easy to understand style that just keeps you reading till the pages run out!” —C Patrick Lauder, M.D., Mammoth Hospital, California “One of my favorite books has been Piero Ferrucci’s ‘What We May Be,’ a gem of transformational insight On getting into Jason Kelly’s abrasive depiction of financial incompetence, I was hardly thinking ‘transformation.’ Shocked resistance was the first reaction to his scolding against stupidity, claiming that America’s most toxic asset is its financially stupid people ‘OMG, has the meticulously disciplined Jason of the ‘Neatest Little Guide’ series on investing, lost it, this time gambling that his rant against stupidity won’t result in his readers thinking him a misanthrope?’ Shock yielded to ‘Aha’ on feeling the hand of one who has made it, helping his readers along his well trodden path to economic character and a moral course to the good life Kelly offers a rare and coherent fix on the interplay between societal economic chaos and the dysfunction of its individual members The enemy is us, and the cure requires a resurgence of interest in individual character ” —George Collins, Philosophy Professor, Attorney Estate Planner “With disarming common sense, Kelly makes the case that personal financial freedom requires very little math skill It depends mostly on our courage to question the social conventions built into modern consumption societies, and our resolve to change our lifestyles accordingly.” —Alan Furth, Economist; International Entrepreneur; Blogger at AlanFurth.com “In his latest book, Jason Kelly has given us a crash course in history and a review of the current state of our society and economy He has shined a spotlight on the rampant lack of accountability that exists today and provided evidence that the cards are stacked against us It’s not all negative though, the book also provides a clear set of rules and tips for how to protect your wallet and get ahead With real life examples of people from all walks of life, Jason illustrates that financial freedom is attainable for all of us.” —Jacob Glenn, Director Financial Services, Rosetta “A must-read if the truth and reality of your financial future is important.” —Roger de Bock, Consultant, Western Financial Planning Jason Kelly John Wiley & Sons, Inc Copyright © 2010 by Jason Kelly All rights reserved Published by John Wiley & Sons, Inc., Hoboken, New Jersey Published simultaneously in Canada No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the web at www.copyright.com Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at http://www.wiley.com/go/permissions Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose No warranty may be created or extended by sales representatives or written sales materials The advice and strategies contained herein may not be suitable for your situation You should consult with a professional where appropriate Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at (800) 762-2974, outside the United States at (317) 572-3993 or fax (317) 572-4002 Wiley also publishes its books in a variety of electronic formats Some content that appears in print may not be available in electronic books For more information about Wiley products, visit our web site at www.wiley.com ISBN 978-0-470-57975-6 Printed in the United States of America 10 Contents Introduction Life as a Sucker Chapter The First Rule of Finance Chapter Credit, Cars, and Castles 13 Chapter Toxic FSP in the Alphabet of Idiocy 27 Chapter The Society You’re Up Against 47 Chapter Government of the Corporations, by the Corporations, for the Corporations 63 Chapter How Money Is Power 89 Chapter Financial Freedom 147 Chapter Guarantee Your Own Well-Being 159 Chapter On the Front Lines of Freedom 169 Conclusion In Yourself You Trust 185 v Contents Appendix A Smart Scenarios 189 Appendix B Getting Out of Debt 191 Appendix C Keep Current 195 Notes 197 Acknowledgments 201 About the Author 203 Index 205 vi I N T R O D U C T I O N Life as a Sucker I t’s time we look honestly at what’s really wrong with the American economy The whole thing nearly collapsed from overwhelming debt in a crisis that began in 2007 and is still raging as I write this in 2009 It seems the economy will survive for now, but thanks only to maniacal government spending—funded by taxpayers The long-term consequences of that spending are probably dire, possibly catastrophic By most of the media’s reckoning, the problem was that unscrupulous banks foisted bad loans on unsuspecting borrowers Families were tricked into buying homes they couldn’t afford, with mortgages they couldn’t pay, based on incomes they didn’t have Because the banks bamboozled them, went the thinking, such people deserved to be bailed out The mortgage payment plans they agreed to follow were restructured so they could stay in their homes Both the bamboozling banks and the bamboozled people were bailed out with taxpayer dollars That’s far from the whole story, though The origins of the crisis extend much farther back than the bad mortgages of the early 2000s, to the creation of America’s consumer culture of excess built on loose credit and mountains of Financially Stupid People Are Everywhere debt Responsibility became an endangered species, ravaged by ad-driven greed and instant gratification Washington justified its enormous bailouts Banks that extended loans to people unable to repay were called too big to fail, and the people who borrowed their way into homes they couldn’t afford were called victims For a moment, though, look closely at those victims, the supposedly poor people huddled in their supposedly humble shelters The picture drawn by the popular story is of people in shabby clothes, sipping clear broth in a pool of candlelight for warmth, walking miles to a bus stop to go to a job that breaks their backs over the years That’s what hard times looked like to previous generations It’s not what we’re talking about today Too many of today’s “downtrodden” live in modern-day castles, wear designer clothes, drive opulent vehicles, eat in fine restaurants, take vacations, showcase “bling-bling” jewelry, and watch big-screen televisions They fund their lifestyle with mortgages they can’t afford and credit cards they don’t understand They live the life of Riley to show how sophisticated and cool they are, but when it all comes tumbling down they slink to Uncle Sam for help, not realizing that he’s part of the problem There’s no dignity in that It’s shameful Rather than whine for financial justice, they should hang their heads Banks got into trouble by lending money to such borrowers and then transforming the loans into exotic investments that skittered across the earth like locusts The loans and securities based on them became known in the media as “toxic assets” that the government had to manage Thing is, those assets didn’t spring from nowhere They were the prickly green weeds above ground, but they weren’t the roots of the problem The roots were the borrowers, those who signed on the line to a payment they couldn’t afford The borrowers, not the loans, were the problem Financially stupid people are America’s most toxic asset Acknowledgments I ’m lucky to count thousands of people on my “free list” at JasonKelly.com They send me their stories, their reactions to current events, and material that makes my books better They’re faster than the media at finding the truth of the moment To all of them I extend a hearty thank you, and to the following members whose stories appear in this book, a special nod of gratitude: Carlos Cao, Jack Chism, Andrew Crawford, Bud Garofalo, Darin Grant, Richard Grant, Tom Hohmeier, Lee Kilgore, Charles Kirk, Neal Lonky, Laura Reynold, Aaron Sweyne, and Sarp Yeletaysi If you’re not already on the list, join us It takes just a moment to enter your e-mail address, and I promise not to send you any credit card ads Thanks to my editing team at John Wiley & Sons: Debra Englander, Kelly O’Connor, Adrianna Johnson, and Claire Wesley They embraced the book’s title and saw its potential to get across a message that’s been mostly lost in the financial fray Our world needs more bold people like them Finally, thanks to my old buddy and financial writing whiz, Dan Denning, for loving the concept of the book and putting me in touch with Debra at John Wiley & Sons 201 About the Author Jason Kelly is the author of eight books, including The Neatest Little Guide to Stock Market Investing, a BusinessWeek best seller He writes financial and political articles at JasonKelly com, keeps in touch with readers on the site’s free e-mail list, and provides investment commentary to subscribers of The Kelly Letter He graduated in 1993 from the University of Colorado at Boulder with a Bachelor of Arts in English He currently lives in Sano, Japan, north of Tokyo 203 Index A AARP, 99 AARP Bulletin Today, 99 Abdel Baset al-Megrahi, 120, 121 A Brief History of Time (Hawking), 98 ACEEE (American Council for Energy-Efficient Economy), 114 Adams, Frank, 33 AHIP (America’s Health Insurance Plans), 99–100 AIG (American International Group), 66 Aldrich, Nelson, 57–58 Allen, Paul, 20 The Allure of Technology: How France and California Promoted Electric Vehicles to Reduce Urban Air Pollution (Calef and Goble), 117–118 Al Qaeda, 125, 130 American Bankers Association, 65 American Council for EnergyEfficient Economy (ACEEE), 114 American International Group (AIG), 66 American Petroleum Institute, 78 The American Prospect, 53 American Recovery and Reinvestment Act of 2009, 73 America’s Community Bankers, 65 America’s Health Insurance Plans (AHIP), 99–100 Associated Press, 72 Atlantic Richfield Co., 118 B Bailouts, Baker, Peter, 84–85 Bank, Justin, 77 Bankruptcy, 151 Bank(s): deregulation, 36 government and, 63–73 politicians and, 80–85 practices, 29 society and, 171–175 Barofsky, Neil M., 66 Baucus, Max, 106–107 Bernanke, Ben, 62 205 Index The Best Way to Rob a Bank Is to Own One (Black), 64 Bill Moyers Journal, 64, 106–107 Black, William K., 64, 67, 68, 70–71 Bonds, 37 Bonner & Associates, 99 Born, Brooksley, 70 BP (British Petroleum), 114, 118, 120 British Petroleum (BP), 114, 118, 120 Brookings Institution, 53 Buchanan, Pat, 129–130 Budget, 190 unnecessary spending, 191 Buffett, Warren, 20, 166 Bush, President, 53, 65, 70–71, 124 vs President Obama, 130 Bush, President George W., 84 Buyer’s remorse, 12 Buying after saving, 10–12 cheat sheet, 190 pacing yourself, 12 C CAHT (Californians Against Hidden Taxes), 119 Calef, David, 117–119 CalETC (California Electric Transportation Coalition), 116 California Air Resources Board, 117 California Electric Transportation Coalition (CalETC), 116 Californians Against Hidden Taxes (CAHT), 119 Californians Against Utility Company Abuse (CAUCA), 119 Cantel Medical Corporation, 94 Cao, Carlos, 170–171 Capital One, 172 Capital Purchase Program (CPP), 172 CareerBuilder.com, 154 Carlin, George, 87–88, 132 Carlson, Stuart, 80 Car(s), 17–23, 50, 161 cheat sheet, 190 depreciation, 19 financing, 17–19, 21 insurance, 18–19 as liability, 17–18 maintenance, 21–22 purchasing, 170–171 registration, 18–19 safety, 22–23 used, 22–23 Cash flow, 15–16 extra, 192 Cassidy, John, 39 CAUCA (Californians Against Utility Company Abuse), 119 CDOs (collateralized debt obligations), 31, 34, 83 CDSs (credit default swaps), 32 Center for Responsive Politics, 77, 86, 113, 122–123, 132, 142 CFTC (Commodity Futures Trading Commission), 70, 82–83 Cheney, Dick, 124 206 Index Chevron, 114 Chism, Jack, 169–170 Cigna, 86, 105 Citigroup, 72 Clemente, Frank, 99 Clinton, President Bill, 65–66, 68, 69, 85, 106 Colbert, Stephen, 100, 132 The Colbert Report, 100 Cold War, 123–124, 125 Collateralized debt obligations (CDOs), 31, 34, 83 Collins, Richard A., 100 Commodity Futures Modernization Act, 68–73 Commodity Futures Trading Commission (CFTC), 70, 82–83 The Commonwealth Fund, 91, 92, 111 Congress, 57 Congressional Budget Office, 52 Congressional Oversight Panel for the Troubled Asset Relief Program, 61, 140 Congress of California Seniors, 119 Conspicuous consumption, 9–10 Consumer(s): average, 10–11 culture, 28–29 Corporations: chief executive officers, 64 corporate vs citizen interests, 139 socialism and, 140–141 CPP (Capital Purchase Program), 172 Crawford, Andrew, 175–176 Credit card(s), 13–17 as backup in emergencies, 14 balances, 16–17, 27–28 cheat sheet, 190 vs debit card, 193 effect on finance, 13–17 history, 50 improper use, 14–15 incentive programs, 16 knee-jerk defenses, 14 minimum payments, 192–193 no-fee, 15 paying off balances, 161 philosophy, 3–4 point systems, 177 ratings, 179 Credit default swaps (CDSs), 32 Credit rating, 31 Culture, debt-based, 3, 46 D Daily Mail, 98, 121 The Daily Show, 78 Debit card, 17 vs credit card, 193 De Borchgrave, Arnaud, 120 Debt, 52 acceptance, as control, 163 culture and, 174–175 cycle, 12 getting out of, 191–193 household, 30–31 management, 48–51 minimum monthly payment, 191 reduction, 192 runaway, 51–54 U.S., 52 207 Index Department of Homeland Security, 135 Department of Veteran’s Affairs, 135 Depreciation, of cars, 19 Doherty, Harry, 65 Dorgan, Byron, 69 Dot-com bubble, 28 Dow Jones Industrial Average, 164 Dudley, William, 72 E Earning(s): cheat sheet, 190 vs spending, 10 Easton, Michelle, 107 Eisenhower, President Dwight, 125 Electric vehicles (EVs), 115 Eli Lilly, 86 Emanuel, Rahm, 142–143 Emerson, Ralph Waldo, 33 End the Fed (Paul), 60, 126, 130–131, 174–175 Enron, 69 EPA, 79 ErkenBrack, Steve, 100 EVs (electric vehicles), 115 ExxonMobil, 114, 118 F FactCheck.org, 77 FBI, 64 Federal Reserve, 33, 54, 57–62, 125–126, 164 blame and, 28 lowering interest rates, 11 Federal Reserve Act of 1913, 58, 59 Federal Reserve Archival System for Economic Research (FRASER), 59 Finance(s): cheat sheet, 190 effect of credit cards, 13–17 focus, 164–167 freedom, 147–157 guarantees, 161 history, 35–38 living within means, 7–12 management, 27–46 rules, Financial crisis: of 2007, origins, 1–2 Financial Services Modernization Act, 68–73 Forbes, 114 Ford, Henry, 115 Foreclosures, 34 Foreign Service, 127 Fortune, 41 Fortune 500, 172 Fowler, Liz, 107 Frank, Barney, 131 FRASER (Federal Reserve Archival System for Economic Research), 59 The Fred Thompson Show, 94–95 FreedomWorks, 101 Friedman, George, 84 Friedman, Stephen, 71–72 Frontline, 54 G Gale, William G., 53 Garofalo, Bud, 170 Gates, Robert, 125 208 Index Gazprom, 114 Geithner, Timothy, 66, 67, 70, 72, 80 General Motors (GM), 115–116 Gerard, Jack, 78 Gilleran, James, 65 Glass-Steagall Act, 69 Glenn, John, 64 Glover, Stephen, 121 GM (General Motors), 115–116 Goble, Robert, 117–119 Golden Rule Health, 100 Goldman Sachs, 66, 68, 70, 72, 80–85, 86, 164 Government: banks and, 63–73 connections to bank fraud and, 64 financial systems and, 38 income and, 149 spending, stimulus, 28 Government Accountability Office, 135 Gramm, Phil, 69–70 Grant, Darin, 176–177 Great Depression of the 1930s, 36 Greenberger, Michael, 83 Gregg, Judd, 52 GSAMP (Goldman Sachs Alternative Mortgage Products) Trust 2006-S3, 41 Guenther, Ken, 65 H Hawking, Stephen, 97–98 Health insurance, 86 costs, 90–113 naming, 104 national health insurance plan, 104, 109–110, 112 preexisting condition(s), 100–104 private, 93 reform prognosis, 107–110 trends, 91 Wall Street and, 104–107 HealthSouth, 86 Hedge fund(s), 37 Heinze, Augustus, 35 Heinze, Otto, 35 Herbert, Bob, 129 Hicks, Bill, 132–133 The Hill, 76 Hogan, Bill, 99 Hoh, Matthew, 127–128 Hohmeier, Tom, 170–171 Home equity line of credit, 44 Home ownership, 23–26 down payment, 24–26 vs renting, 23, 26 House bill H.R 3962, 108–109 I IBD, 97 IBM, 155 Income: disposable, 30–31 extra, 191 government and, 149 lifetime, 147–150 living within means, 7–12 middle-class, 62 from real estate transactions, 150–153 reduction of expenses, 192–193 209 Index Independent Community Bankers of America, 65 Inflation, 61 Insurance: car, 18–19 health, 86, 90–113 private mortgage insurance, 24 Interest rate(s): adjustable, 40 incentives, 15 lowering, 11 variable, 40 Investment(s), 160–164 Investor’s Business Daily, 96–97, 98 Iraq war, 53, 76, 120, 124 J JPMorgan Chase, 72 Japan, lifestyle, 14 JasonKelly.com, 195 Jekyll Island Club, 58 Joint Standoff Weapon, 76 Justice Department, 65 K Kashkari, Neel, 71 Kilgore, Lee, 171–173 Kirk, Charles, 162–163 The Kirk Report, 162–163 Krause, Audrie, 119 Krauthammer, Charles, 143 Kucinich, Dennis, 108–109 L Larry King Live, 102 Larson, Doug, 33 Leadership, Legislation: American Recovery and Reinvestment Act of 2009, 73 Commodity Futures Modernization Act, 68–73 Federal Reserve Act of 1913, 58, 59 Financial Services Modernization Act, 68–73 Glass-Steagall Act, 69 Tillman Act, 77 “Liar’s loan,” 42–43 Life Is Worth Losing, 87–88 Lifestyle, 2–3, 163 conspicuous consumption, 9–10 in Japan, 14 money and, 153–157 Lindbergh, Charles, 59 Loan(s): equity and, 41 quality, 32 runaway debt and, 51–54 subprime, 26, 30, 31, 44, 63–64, 182 Lobbyist(s), 74–76, 85–87 Long-Term Capital Management (LTCM), 37 Lonky, Neal, 171 Los Angeles Times, 123–124 LTCM (Long-Term Capital Management), 37 Lynn, William, 76 M Mad magazine, 33 Mandelson, Lord, 121 Marathon Oil, 86 MBSs (mortgage-backed securities), 31 210 Index McCain, John, 64, 82, 142 McCaughey, Elizabeth, 94–95, 96 McChrystal, General Stanley, 128 McLaughlin, James, 65 Medicare, 53, 54, 91–92, 94–95, 109 Mercantile National Bank, 35 Meriwether, John, 37 Merrill Lynch, 66 Merton, Robert, 37 Microsoft, 20 Middle-class, 61 Military spending, 123–132, 138 Milken, Michael, 36 Mobil Oil Co., 118 Modisette, David, 16 Money, 33 cheat sheet, 190 lifestyle and, 153–157 management, 169–170 as power, 89–145 Money Trust Investigation, 59 Moore, Michael, 130 Morgan, J P., 35, 58 Morgenson, Gretchen, 66 Mortgage-backed securities (MBSs), 31 Mortgage(s): in 2006, 27 cheat sheet, 190 payment plans, quality, 29–30 second, 41 Moyers, Bill, 106–107 N The Nation, 131 National Economic Council, 73 National Health Service (NHS), 97, 109 National Institute for Automotive Service Excellence, 22 National Institute for Emergency Vehicle Safety, 119 National Institute for Health and Clinical Excellence (NICE), 97–98 National Monetary Commission, 57–58 The New Republic, 96 Newsweek, 17, 78, 118 The New Yorker, 39, 140 New York Stock Exchange, 35, 72, 172 New York Times, 66, 84–85, 118, 124, 129 NHS (National Health Service), 97, 109 NICE (National Institute for Health and Clinical Excellence), 97–98 9/11, 65, 120, 124, 126 Nixon, President Richard, 106, 112 Nobel Peace Prize, 128–129 “No Exit” (McCaughey), 96 Novak, Viveca, 77 O Obama, President Barack, 70– 71, 77–80, 93–94, 106, 129 vs President Bush, 130 The Observer, 105 OECD (Organization for Economic Cooperation and Development), 91 211 Index Office of Thrift Supervision, 65 Oil, 77–80 dependence, 113–123 O’Neill, Paul, 53–54 Organization for Economic Cooperation and Development (OECD), 91 Orszag, Peter, 53 Owens, Howard, 119 P Panic of 1907, 35, 57 Patterson, Mark, 80, 83 Paul, Ron, 60, 126, 130–131, 174–175 Paulson, Henry, 70, 131 Petrobras, 79–80, 134 Pfizer, Inc., 99 Phelps, Michael, 10 Philip Morris, 142 Phillips Petroleum, 118 Piper, H., 115 PITI (principal, interest, property taxes, insurance), 24–25 PMI (private mortgage insurance), 24 Podesta, Heather, 85, 86 Podesta, John, 85 Podesta, Tony, 85 Politicians, 73–74 banks and, 80–85 Ponzi scheme, 54, 64, 164 Potter, Wendell, 104–106 Presidential Medal of Freedom, 98 Private mortgage insurance (PMI), 24 Prudential, 86 Public Citizen’s Congress Watch, 99 “Putting It Simply,” 58–59 R Rasmussen Reports, 85 Raytheon, 76 Real estate market: in 2006, 27 down payment, 161 equity, 41 foreclosures, 34 income from transactions, 150–153 surplus of inventory, 33 Recession(s), 86, 152, 165, 172, 181 Reich, John, 65 Remote Area Medical, 104–105 Renting, vs home ownership, 23, 26 Resolution Trust Corporation, 36–37 Reynold, Laura, 179–181 Ring of Fire Radio, 93 Rockefeller, John D., 35 Rockefeller, John D., Jr., 58 Rolling Stone, 81 Royal Dutch Shell, 114 Rubin, Robert, 65–66, 68, 72, 80 S Salomon Brothers, 37 Sanders, Bernie, 93 San Luis Obispo Tribune, 152 Saving(s), 161 before buying, 10–12 212 Index cheat sheet, 190 Savings and loan institutions (S&Ls), 36, 63–64 Scheer, Robert, 123–124 Scholes, Myron, 37 SEC (Securities and Exchange Commission), 91 Securities and Exchange Commission (SEC), 91 Securitization, 31 Senate Budget Committee, 52 The Seniors Coalition, 99 Shell Oil Co., 118 SIVs (structured investment vehicles), 32 60 Plus Association, 99 Sloan, Allan, 41 S&Ls (savings and loan institutions), 36, 63–64 Socialism, corporations and, 140–141 Social Security, 53, 54 Société Générale, 66 Spending: cheat sheet, 190 vs earning, 10 unnecessary, 191 Stanford Magazine, 70 State Savings Bank of Butte, Montana, 35 Status symbol(s), 9–10 Stewart, Jon, 78, 81 Stimulus, 28, 73 Stock(s), 162 Stratfor, 84 Structured investment vehicles (SIVs), 32 Summers, Lawrence, 65–66, 68, 72–73, 80 Surowiecki, James, 140–141 Sweyne, Aaron, 44–46 Swiss Reinsurance, 86 T Taibbi, Matt, 81–82, 84 Take-home pay, 17, 21 Taking Our Government Back (Obama), 74–75 TARP (Troubled Asset Relief Program), 44, 66, 71, 80, 112–113, 131, 172 Tax(es): cuts, 53 deductions, 49 Technology, 115 Texaco, 118 New Yorker, 140 Tillman Act, 77 Time magazine, 118 Toward Utility Rate Normalization (TURN), 119 “Toxic assets,” 2–3, 34, 39 Toyota Motor, 114, 116 Tranche(s), 31–32, 34 Troubled Asset Relief Program (TARP), 44, 66, 71, 80, 112–113, 131, 172 Truman, President, 106 TURN (Toward Utility Rate Normalization), 119 U Union of Concerned Scientists, 114–115 United Copper Company, 35 United Seniors Association, 99 213 Index U.S Senate Committee on Commerce, Science, and Transportation, 105–106 U.S Treasury, 35, 57, 72, 80, 135, 172 bonds, 37 USA Today, 118 Utility Consumer’s Action Network, 119 V Veterans Health Administration (VHA), 97, 109 VHA (Veterans Health Administration), 97, 109 W Wall Street, 28, 62 health insurance and, 104–107 Wall Street Journal, 118, 142–143 Wal-Mart, 20, 114 Walton, Sam, 20 Warren, Elizabeth, 61, 140–141 Washington, President George, 125 The Washington Post, 61, 72, 85, 118, 140, 143 Washington Times, 120 Wasserstein Perella & Co., 143 Wealth, conspicuous consumption, 9–10 The Weekly Standard, 110–111 Weil, Dr Andrew, 101–103 WellPoint, 107 West, Mae, 33 Western States Petroleum Association (WSPA), 119 Weyrich, David, 152 Whitehouse, Sheldon, 62 Why Our Health Matters: A Vision of Medicine That Can Transform our Future (Weil), 101–102 Wilson, Pete, 118 Woods, Tiger, 10 Woodward & McDowell, 119 World Bank, 72 Wright, Jim, 64 WSPA (Western States Petroleum Association), 119 Y Yeletaysi, Sarp, 173–174 Yellen, Janet, 54–55 Yelton, Jack, 33 Z Zero Emission Vehicle (ZEV) Mandate, 117 ZEV (Zero Emission Vehicle Mandate), 117 214 P R A I S E F O R Financially Stupid People Are Everywhere “This book is a blast of cold air that will peel layers of somnambulism from the American consumer psyche Deftly skewering both right and left political extremists, Kelly provides example after example of why it is high time to stop thinking exploitation of the common consumer (aka, financially stupid people) by ‘banksters’ and the power elite can ever be brought under control Instead, he explains how and why our best and only hope is to make sure we’re not counted among them.” —RICK MICHALEK , Principal, RJM Consulting; former Senior Credit Officer, Moody’s Investors Service “Jason Kelly helps you see the financial traps and offers solutions to avoid becoming one of the financially challenged of America This neat little book will help you live debt-free simply by learning three rules to avoid the traps in today’s environment.” —CLIFF GIRARD, CEO, Acorn Ventures, Inc “My work requires reading a large number of business and financial sources Jason Kelly teaches me more about the world of business, finance, and markets than any ten other sources combined Jason is that good He is an incredible teacher and a gifted writer This latest book is vintage Kelly.” —PAUL BENTON WEEKS , attorney; investment banker; CIO, Templeton Family Funds “Jason’s book provides the reader with glasses to see the financial, political, and business worlds that conspire to take money out of the pockets of every average Joe His basic approach to personal financial management should be required reading for every high school student entering the working world for the first time.” —PAUL TARDIF, Vice President, Waters Corporation “A scorching treatise of financial mismanagement at all levels Buy two, a personal copy and one for the president!” —AINSLIE FRENCH , PhD, Research Scientist, Laboratory for Flow Physics, Italy ... Maybe someday America will wake up and smell the coffee.” —Frank Mancini, CEO Bellabacci Inc “As a professional money manager I strongly believe being financially smart is better than being financially. .. issuing one of her many credit cards and still pays on them today even though they’ve long since gone out of style What did she do? Replaced them with new ones, of course—before she’d ever paid off... which, of course, he was These people don’t own anything The First Rule of Finance Every one of them was proud of what they’d financed They seem to have bought it for the purpose of being proud, of